Gratuity Calculator
Under the new Labour Codes, including fixed-term employees and the 50% wages rule.
This calculator gives an estimate for planning only. Actual amounts depend on your full facts and the law in force. For advice on your situation, talk to us.
How gratuity is calculated
The four Labour Codes came into force on 21 November 2025. Gratuity is now governed by the Code on Social Security, 2020, which replaced the Payment of Gratuity Act, 1972.
- Formula: 15 ÷ 26 × last drawn monthly wages × years of service. 26 is the number of working days in a month and 15 days' wages are paid for each year.
- Service: a part-year of more than six months is rounded up to a full year.
- Eligibility: permanent employees need 5 years of continuous service (not needed on death or disablement). Fixed-term employees now qualify after 1 year.
- 50% wages rule: wages mean basic pay plus dearness allowance. If allowances are more than 50% of total pay, the excess is added back, so wages are at least half of total pay.
- Ceiling and tax: gratuity is capped at ₹20 lakh and is tax-free up to that limit for employees in the private sector. It is fully tax-free for government employees.
- Not covered by the law: the tax-free amount is 15 ÷ 30 × average monthly salary of the last 10 months × completed years of service.
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